Oct. 31 (Bloomberg) -- The Ibovespa dropped for a third
straight session as OGX Petroleo e Gas Participacoes SA plunged
after filing for bankruptcy protection, setting the oil company
up for removal from Brazil’s benchmark equity gauge.

The Ibovespa fell 0.5 percent to 53,900.41 at 3:04 p.m. in
Sao Paulo, paring this month’s advance to 3 percent. The real
slid 1.6 percent to 2.2267 per dollar today.

“OGX is most to blame for Ibovespa’s recent losses, but
the index is not falling just because of that,” Otavio Vieira,
who helps manage 350 million reais as a partner at hedge fund
Fides Asset Management, said in a phone interview from Rio de
Janeiro. “Macroeconomic conditions in Brazil are still weighing
on the market. Inflation is high, interest rates are rising and
some companies are reporting disappointing earnings.”

Gafisa lost 3.2 percent to 3.04 reais. Swap rates, a gauge
of expectations for moves in Brazil’s benchmark interest rates,
rose amid speculation that a weaker real will fuel inflation.

OGX tumbled 35 percent to a record 11 centavos. The stock
will be removed from the Ibovespa today after the company filed
for bankruptcy protection, BM&FBovespa said in a statement.
While shares will still trade in Sao Paulo, they will be cut
from the benchmark gauge after markets close. The index will be
rebalanced after OGX’s removal.

‘More Clear’

While a 97 percent plunge in its shares this year made OGX
the smallest company by market value on the Ibovespa, the stock
accounted for 82 percent of the stock benchmark’s 11 percent
slump during that period.

The Ibovespa will reflect with more accuracy what happens
in the equity market once OGX is removed from it, Luis Gustavo
Pereira, a strategist at Futura Corretora brokerage in Sao
Paulo, said in a phone interview.

“Now that the Ibovespa won’t move according to OGX’s
volatility, things will be more clear,” Pereira said.

Gerdau added 4.3 percent to 17.60 reais. The company posted
adjusted net income of 595.1 million reais, which compares with
an average estimate of 441.4 million reais, according to data
compiled by Bloomberg.

Embraer dropped 4.2 percent to 15.79 reais.

Trading volume of stocks in Sao Paulo was 6.87 billion
reais yesterday, compared with a daily average of 7.61 billion
reais this year through Oct. 22, according to the latest data
available from the exchange.